Fallow on Housing affordability

Brian Fallow says the following facts are sobering. They are indeed:

It uses data from Statistics New Zealand’s survey of family income and employment (affectionately known as Sofie) to estimate what proportion of couples and single people who rent could afford to buy.

To buy, that is, a house from among the cheapest 25 per cent available in their region while keeping their mortgage payments at no more than 30 per cent of their gross income.

They reckon that in 2000, 59 per cent of renting couples and 11 per cent of single people could have afforded a lowest quartile priced house.

By 2006, however, that had dropped to 29 per cent of couples and only 2 per cent of single renters.

It gets worse if you exclude those who could have afforded (based on their net worth) a 20 per cent deposit but who for whatever reason had decided not to.

Among the rest, the proportion of couples who could afford to buy dropped from 40 to 12 per cent since 2000.

“At current prices and interest rates, the gap between the income of those who cannot afford to buy a lower-quartile-priced house and the income needed to service a mortgage on such a house while keeping the payments at or below 30 per cent is large,” the report says.

“On average to bridge the gap, a couple would need a deposit of $122,000 and non-partnered individuals would need a deposit of around $177,000.”

For many people, the officials drily note, this would pose a considerable hurdle.

I am so glad I got in just in time in 2001, and purchased.